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Beauty Professional Guide 

To Taxes, Finances, & Savings




Insurances, Taxes and Planning For Your Future


As a professional in the beauty industry, you probably already know some of the most important parts about running a successful business.

Maybe you’re incredibly well-versed in how to perfect your craft, and perhaps you know the secrets to exploring and honing your creativity and business pragmatism. But, before you can slap an A+ sticker on your business savvy,  it’s important to ask yourself a serious question: how much do you really know about insurance, retirement, and planning for your future?

We know what you’re thinking – reign it in, guys, I haven’t even had my coffee yet – but the fact of the matter is, when you’re working in the beauty industry, you need to have a good, solid plan laid out in front of you to protect yourself, your business, and help you to prosper in the long term.

So, what do you know about these things? 
Do you have a plan in motion for your retirement? How about insurance – are all your bases covered? Your probably ready to go when tax season rolls in, right?

If you answered no to any of those questions – that’s okay. You don’t have to have a degree in business, insurance, or tax law to ensure that you’re fully prepared, and when you break it all down, it’s not as complicated as it sounds.

While we can’t promise that learning about, researching, and planning for these types of things is going to be the most exhilarating part of your business, it’s definitely crucial. We want to make sure that you’re doing everything you can to be prepared, study up, and learn about how you can best protect yourself and plan for the future.

To do that, we laid a ton of relevant, helpful, and vital information that you’ll need to get prepared!

Check out our comprehensive guide below to get a better grasp on what kind of insurance you should be looking into, how you can start preparing for your future, and even some helpful tips for tax season.

Insurance, Preparing for the Future, and Saving for Retirement


The easiest way to talk about these kinds of topics is to just dive right in.

So, grab a glass of wine and rip off the band-aid with us while we get into saving for the future.   

In this guide, we’re going to cover three main proponents that we believe are absolutely vital for your business: insurance policies, retirement planning, and taxes.

We know, we know – it’s probably all sounding super mundane and boring, but we promise that this kind of information is incredibly necessary to your personal and professional well-being. Without these types of plans for the future, you could be stuck without sufficient funds for retirement, in a tough legal spot without insurance, or even in trouble with the IRS for accidental tax mistakes.

While we can’t promise these three topics are going to be the most exciting information we ever give you, we can promise it’s incredibly worthwhile, super helpful, and vital to your career!

So, lets get to it. We’re kicking this party off with one our favorite topics – insurance!

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The Types of Insurance All Beauty Pros Should Have


We’re going to ease you right into this with a little simple, need-to-know info.

Read up on the types of insurance policies you should have in the beauty industry and a snippet about what exactly they are and what they mean for you!

HEALTHCARE INSURANCE

LIFE INSURANCE

PROFESSIONAL LIABILITY INSURANCE

BUSINESS OWNER POLICIES

DISABILITY INSURANCE


Why Do I Need These Types of Insurances?


PROFESSIONAL LIABILITY INSURANCE

Whether you are renting a booth at a salon, work in your own beauty space, or work as a freelance beauty professional, purchasing a beauty insurance policy supports and protects your career wherever you go.

Liability Insurance provides peace of mind and assurance no matter where your career takes you as an artist. A little insurance knowledge can empower you as a professional to make the right decision when it comes to researching and purchasing a professional and general liability insurance policy.

In any industry, accidents are inevitable and unpredictable.

The average claim in the beauty industry is $5,500! Without insurance, this cost would come 100% out of your own pocket.

By carrying professional liability insurance, you can transfer the risk of monetary loss to your insurance provider. You no longer carry the emotional stress of figuring out how you’re going to pay a claim or defend yourself during the investigation period.

It only takes a single lawsuit or claim to bankrupt you. We live in a litigious society.

You are a professional with specialized training and certification. Though you may not be ultimately responsible for an injury or damages, but your role makes you a target.

Even baseless claims require you to defend yourself. Legal defense can be costly.

HEALTH INSURANCE

If you’re reading this to yourself and thinking something like, “I’m a fairly healthy person, I probably don’t need health insurance – especially since my salon doesn’t provide this for me,” then we’ve got some news for you – everyone needs health insurance, you especially.

Think about it.

You stand on your feet all day. You work long hours. You probably work with sharp objects. You work around people.

All of these are liabilities that could add up to you getting injured or sick, and unfortunately, a trip to the ER or to the doctor is pretty expensive. Investing in the right kind of health insurance can be an affordable way to give yourself peace of mind as well as a safety net that’s there for you when you need it.

There are tons of sources for learning more about the types of plans you need, as well as establishments that can help you find the right plan – public or private – to fit your budget needs.

It’s hard to pin down exactly how much health insurance coverage costs because the premium you pay is not going to be the same as someone else. It all depends on factors that affect you, like your age, pre-existing medical conditions, family history, liability, gender, age, profession, previous insurance, etc.

However, according to Value Penguin, some HMOs average around $230 per month, while POS, PPOs, and EPOs average $244, $251, and $254, respectively. Again, this will all depend on the factors specifically affecting you!

LIFE INSURANCE

It’s a morbid thought, but unfortunately, everyone needs life insurance.

Why, you might ask? For security. For your family. For peace of mind.

The last thing you want – in the case of your untimely, unexpected, or unfortunate death – is for your family, or your business, to be saddled with financial burdens they, or it, are not prepared to shoulder.

While this isn’t necessarily specific to the beauty industry, it can certainly be a helpful, additional coverage for you to invest in.

The beauty industry isn’t necessarily riskier than other industries, but there are certain risks that are associated with the work you do. It pays to be covered, especially to help cover immediate costs for your dependents.

Life insurance protection can help to pay off mortgages, help to fund dependent retirement, provide charitable bequests, and aid you in estate planning.

This is something that folks in the beauty industry should especially consider if  they have families.

If you’re interested in acquiring life insurance, look into highly-rated insurance companies that can offer good prices, excellent service, and have stellar ratings.

When it comes to life insurance, you want to be comfortable with who you’re choosing to do business with. You’ll likely have to take an insurance health exam, fill out forms, apply for the insurance, and work through your quotes with your provider.

As a note, the younger you are when you acquire your insurance, the cheaper it will be – so if you need this type of insurance and are strongly considering it, we suggest you act fast!

DISABILITY INSURANCE

This type of insurance is going to be necessary when you experience and unforeseen injury and are unable to contribute income like you were once able to. You might be young, healthy, and spry, thinking that nothing can stop you – and in truth, you might be just fine.

But in the off chance that you accidentally hurt yourself, temporarily or permanently, you’ll want to be covered to ensure that you’re going to be able to earn a living.

According to the Council of Disability Awareness, more than 1 in 4 workers will experience disability for at least 90 days (or more) before they reach their 60s. This doesn’t always mean incredibly tragic and intense instances of become paralyzed, losing a limb, etc. --- this can include things like back injuries, heart attacks, cancer, and other illnesses.

In other words, it’s more than necessary to have this type of coverage.

The price of your disability insurance policy will generally depend on your age and health, your gender, your tobacco use, your occupation, your occupation (you’ll pay more in a higher risk job), your income, and the length of benefits you hope to include. 

You can buy individual disability insurance from several private companies like Colonial Life, Ameritas, Dion Demand, Northwestern Mutual, and many, many more!

Before we dive into more about future planning, it’s worth it to note that most of your insurance premiums can be deducted on your taxes!

Make sure you look into this when it comes time for taxes.

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How You Can Plan & Budget for Your Retirement


As much as we hate to acknowledge it, there’s going to come a time where our employment status will change. 

While we understand that in the here and now, you’re entirely happy with your job, relish the challenges of your industry, and find the work stress invigorating, a hard truth remains – one day, you’re going to want to retire.

Another harder truth comes right after that one – without a plan in place, your retirement likely isn’t going to be as pleasant as you hope it is.

Having money set aside for your future is vital for anyone, no matter what industry they’re in.

Admittedly though, it can be a bit tougher for people in the beauty industry when it comes to retirement plans.

Why? 

Often, folks who immerse themselves in the beauty industry end up owning their own salons or working at smaller salons (this isn’t always the case, but it’s true for a majority of people in the industry)  -- often, this makes providing retirement programs and benefits for employees, and even for yourself, incredibly difficult.

We’ve got good news though, you can definitely plan for your future --- it’s just going to take a little extra attention to detail, care, organization and planning.

We’re sure you’re up for it

We’ve laid out a few specific tips that we think can help you with your retirement plans. With them, can start putting aside money for your future and firmly cement a comfortable lifestyle in place for yourself.

Try To Get Rid Of Debt Quickly, But Reasonably

Start A Savings Account

Consider Some Retirement Investment Options

Start As Soon As Possible

It's Okay To Ask For Help

Taxes and How to Claim Them


We know it’s hard to focus on anything else but running your business, being there for your clients, and keeping on-trend in the beauty industry, but adding in a dash of tax savvy to your list of priorities can seriously help you come tax time – we’re talking money saving and some serious write-offs.

More than that, though, you need to make sure you’re filing correctly and counting your exemptions correctly to keep your business’ legal status all clear.

That’s why we put together an awesome mini-checklist that you can run through to ensure that all of your tax affairs are in order.

Check out our list, as well as some helpful tips and tracks we tacked on, in to make sure you’re prepared!

Figure Out Your Employment Status

This is the absolute first thing you need to figure out when it comes time to file your taxes, so understanding it as soon as possible can only help you plan for tax season. You’ll need to consider exactly what kind of employment status you have.

For example, do you work for yourself and run your own salon or studio? That one’s easy – you’re self-employed.

But what about if you work at someone else’s business? Are you an employee? Are you an independent contractor? These two things might seem similar in your day-to-day life, but come tax season, they both incredibly different.

In fact, all of the employment status categories require different forms and considerations.

A self-employed person will pay a self-employment tax, whereas an employee would not. If you’re up in the air about whether or not you’re an independent contractor versus an employee, just consult the form your salon gives you around tax time. 

If you receive a 1099-misc, then you’re an independent contractor. A W-2 would likely make you an employee.

Overall though, it’s best to be clear about these types of things from the start of your agreement.

Figure out your status so you can the correct tax forms, figure out what kind of deductions you can look into, and how you should file.

Above All, Stay Organized

Whether you’re a creative genius who doesn’t have a system for their craft or super-organized, neat freak, you’re going to need to ensure that your filing system, documentation, and tax information are incredibly ordered.

Make sure that, at the beginning of the year, you’ve put together a fool-proof system that has room to keep everything in check – your employee status information, your receipts, your day-to-day information, your income documents, etc.

All of the relevant information you need for taxes should be kept in one place, but above all, it should be kept organized so that you won’t have to sort through a rat’s nest of documents to get the information you need.

Trust us, come tax time, you’re likely going to be dealing with a ton of stress – don’t add to the madness with a rousing game of “find the w-2 needle in the giant, paper-waste haystack.”

Know About Your Tax Deductions

This part is actually super fun because this is the part we all love – saving money.

It’s important to really understand what’s deductible and what’s not when it comes time for tax breaks, so we’re going to try to paint you a clearer picture of what sort of things you can claim.

Overall, consider the money that you invest in your beauty business (let’s just say cosmetology for the sake of simplicity) as something that qualifies for a tax break. So, the upfront costs for setting up your salon – all the equipment, the work-space, the furniture, the technology, etc. – could potentially qualify for a tax break and dramatically reduce the taxes that you owe.

Do you run your business? You’re definitely eligible for several tax breaks.

Further, if you run your business out of your own home, you could even qualify for home office deductions and reduce your rent, your utilities, and maybe even your homeowner’s insurance. Other things like licensing fees (which you definitely paid to get your license), business-related insurance premiums (Hello, that’s exactly what we talked about earlier in this guide), and legal fees can also be deductible!

You’ll want to consider other factors that are associated with running your business, such as marketing tools, ad campaigns, your day-to-day tools (like hair color, shampoo, combs, scissors, foils, etc.), your website, IT support etc. All of these things are vital to your business and could qualify for several deductions – this is why keeping all of your paper (organized!) is going to matter so much.

Remember, there’s no problem with asking for a little tax help.

Working with an accountant, or even working with an online program that guides you step-by-step through your deductions, could be a great secondary choice to ensure that you’re thinking of all the deductions possible and filing them correctly.

Breaks Can Come From Professional Advancement

If you didn’t know, you can qualify for tax benefits based on the training courses you take and the personal development you undergo as a professional.

For example, want to take an advanced course on blonding and bleaching? Do it – you can probably claim an education tax credit for it (especially if you’re taking the course from a recognized institution).

It’s even possible that the money you spend on tuition could be tax exempt. Further, you could potentially claim continuing education costs, qualifying you (possibly) for another tax deduction!

Of course, we recommend checking in with the institution (and perhaps your accountant) first, but this could likely be the case!

When All Else Fails, Get Help

Listen, we recognize that you might not be made of money, so we don’t mean that you should pay a ton of hard-earned cash to an accountant to tell you things you already know. We do think that if you find the tax thing a touch confusing, it always pays to ask an expert for help.

Our best advice?  Start on this early.

This is for two reasons. 

Firstly, by starting on it early, you’ll get a better idea of what makes sense to you and what doesn’t. 

Secondly, if you know early on that you’re going to need some assistance, you can set aside money specifically for tax advice.

This will help with the financial burden later on if you find that you definitely need to consult with an expert.



Even though this kind of information can be a little dry and a little boring --- especially when you compare it to the other amazing, interesting parts of your career – it’s incredibly crucial to take care of these things.

Above all, just remember, without preparation, you might be in bad spot when it comes time to better build your business, retire, or even pay your taxes.

Investing time now into understanding and planning is only going to make you better at what you do!

Good luck!